Big brick and mortar retailers have been pushing Congress for an Internet sales tax to remove the market advantage that Online retailers have had for a while. Big brick and mortar stores have to pay more for rent, labor, shoplifting, and other business expenses than cheaper to run Internet based businesses such as Amazon and Ebay. Brick and mortar stores as a whole charge steeply higher prices than Internet based businesses do, despite the higher cost of shipping, which the customer usually pays. And now it looks like the lobby efforts of the big physical retailers is paying off for them big time, as Senator Dick Durbin(D-Illinois) is now promising to bring an Internet sales tax proposal to the floor of the Senate as soon as he can possibly do through the Senate Finance Committee as a claimed as a form of “corporate tax reform” measure.
What is so regressive about Durbin’s legislation is that tax agents from other states will start to send tax bills to small Ebay sellers thousands of miles away who sold someone a sweater by mail, asking for taxes for these small items. A small seller will then pay postage as well as go into an accounting situation just because someone’s Aunt Mildred bought herself a sweater that looked pretty on Ebay. Durbin may like a situation like this because it may mean a lot more taxes for government, but for something like the Internet, this is an unworkable mess. Normally, taxes are only due and paid by retailers working within their own state as part of their state tax filings. Durbin’s proposal would force some small time used sweater seller on Ebay to become a tax expert on all 50 states, and then to spend time and postage money, sending out small checks to states with a sales tax. Another variable is the possibility of a federal sales tax owed only by Online retailers to the federal government. Besides getting to pay Ebay fees, Paypal fees, postage fees, shipping materials fees, Ebay sellers will now have to figure out taxes on small items. Some Ebay items only sell for around 99cents in some cases, such as an Email based download product.
There you go, government so over-bloated and expensive, that they constantly look for new tax revenues, thereby creating new taxes to squash something new and exciting like the growth of Internet-based business sales. Next to a lame proposal by Microsoft to someday possibly seek some plan to charge Internet postage rates to send Emails, this new plan to tax Internet business is the worst idea ever. Certainly, Amazon, Ebay and other Online businesses don’t like this idea at all!
The growth of the Internet has been one of the few good spots for the U.S. economy during these recession years. If Congress acts to put some real brakes on the Internet growth of sales, it will only have a very negative impact on the American economy. Congress doesn’t need to “fix” what isn’t broken. One of the few areas of American business that keeps humming along, creating jobs, lowering travel expenses and fuel consumption between jobs, and helping to prop up the sick American economy.
Certainly government is in a real financial mess, whether you talk about individual states or the federal government. But, squashing the growth of Internet based business is hardly any plan to make the economy stronger.